Little-mentioned tax-cut targets

WASHINGTON
— For Virginia chicken farmers and Oregon loggers, the nearly $800 billion tax bills moving through Congress has a provision for you.

There's also one benefiting whalers in Alaska, owners of steel plants, and train operators everywhere. In fact, there's something for just about everyone in the GOP tax bills - even walleye fishermen, who can now get a break on tackle boxes.

Amid all the chest-thumping on Capitol Hill about tax breaks for ordinary Americans, the bills are full of dozens of little-mentioned - but not always little - tax-relief measures for special interests.

Over 10 years, budget projections show, direct tax relief for businesses would account for roughly $100 billion, or 12 percent, of the $792-billion tax bill that passed the House last week. A Senate bill of equal size being debated this week offers business breaks totaling about $50 billion.

The special-interest provisions tucked into the bills range vastly in size and sweep from a $30 million repeal of the excise tax on fishing tackle boxes, to a $35 billion "international competitiveness" package that mainly benefits big multinational firms.

Trade groups and lobbyists defend the cuts, arguing that many of them will help ordinary Americans and make the tax code fairer.

Yet critics say such items unfairly benefit targeted industries and corporations at the expense of the tax-paying public and, in some cases, the environment. Lawmakers slip them in to please powerful industry groups or local constituencies, rather to serve broader goals of economic and social well-being, critics say.

"The multinationals and banks and insurance companies and the oil industry are all over the tax-writing committees," says Robert McIntyre, director of Citizens for Tax Justice, a Washington group that supports tax relief for middle- and lower-income families.

Indeed, the winners in the House and Senate bills range from high-tech and financial-service companies to the steel, oil and gas, timber, and electric-utility industries.

Global playing field

Both bills offer major incentives for "international competitiveness." By far the largest single provision - worth nearly $25 billion in the House bill and half that in the Senate version - would allow US multinationals to reallocate interest deductions so as to expand the foreign tax credits they claim on their US tax returns.

"US multinationals have been penalized by the current law," says Kenneth Kies, a co-managing partner at PricewaterhouseCoopers here who lobbied for the interest allocation shift for corporate clients.

Unless US law is brought into line with more-favorable foreign tax regimes, more American-based global firms are likely to move their headquarters overseas, says Mr. Kies, a former chief of staff of Congress's Joint Committee on Taxation. "We should really be worried about runaway headquarters," he says.

But opponents contend that the US multinationals are simply leveraging the location issue to win tax concessions. "They are using empty threats to cow some members of Congress," Mr. McIntyre says.

Another sizable chunk of tax relief, worth $13 billion in both bills, would extend the research credit for five years - a measure that benefits technology companies.

'Distressed industries'

Additional measures, of particular concern to environmentalists, offer billions in tax savings for nuclear plants and "distressed industries" such as steel manufacturers, oil and gas firms, and timber companies. Steel firms and others that are marginally productive would also gain from relief from the "alternative minimum tax."

For example, under the House bill, utilities that merge and acquire nuclear plants would be allowed to continue to defray taxes - more than $1 billion over 10 years - associated with the costs of decommissioning the plants.

"Why should we be continuing to subsidize this industry that burdens the country with nuclear waste and aging power plants?" says Anna Aurilio, a staff scientist at US Public Interest Research Group (US PIRG), an environmental and consumer watchdog group in Washington.

Similarly, environmentalists question some $300 million in tax benefits for timber firms that include lower capital gains on the sale of trees and an expanded tax break for the cost of replanting. "If they are loggers, they'd like to reforest anyway," Ms. Aurilio says.

Finally, tax relief for oil and gas firms, and a repeal of the 4.3 cents per gallon tax on railroad fuel and inland waterway fuel, are seen by critics as unneeded help for heavily subsidized and polluting industries.

As experts debate the major business provisions, many are scratching their heads over smaller - and quirkier - items sprinkled through the bills.

An obscure Senate item, for instance, would grant about $660 million in tax credits over 10 years to companies that burn chicken droppings to generate electricity. The idea is favored by large chicken farmers in Maryland, Virginia, and Delaware, home to Republican Sen. William Roth, who chairs the Senate Finance Committee.

Native Alaskan whaling captains are also singled out for a break in the Senate bill. It would allow the captains to subsidize whale hunts by claiming charitable deductions for the meat they give away afterward. The cost: about $1 million over five years.

Tackle-box politics

The House bill, however, dished up the oddest tax cut with its repeal of the 10 percent excise tax on fishing tackle boxes. Listed under "miscellaneous provisions," the cut would mean cheaper tackle boxes, a move supported by manufacturers including one located in the district of House Speaker Dennis Hastert (R) of Illinois, himself an avid fisherman.

He "can go back to his constituents who might fish and personalize it ... and say 'Look what I've done for you,' " says Tom McClusky of the National Taxpayers Union.